UNITED STATES OF AMERICA v. Standard Chartered Bank

Background

Brutus Trading brought this lawsuit for the United States, alleging that Standard Chartered Bank, Standard Chartered PLC, and Standard Chartered Trade Services Corporation engaged in banking practices that violated U.S. sanctions against Iran. The court dismissed Brutus Trading’s complaint in July 2020 after finding that the Government had identified valid reasons for dismissal and that Brutus Trading had not shown the dismissal was improper. The Second Circuit affirmed that decision and the court’s later denial of Brutus Trading’s request to reopen the case based on news reports.

Brutus Trading then filed three motions: a motion under Federal Rule of Civil Procedure 60(d)(3) to set aside the earlier decision based on alleged fraud on the court; a motion under Federal Rule of Evidence 706(a) to appoint an independent expert to analyze electronic transaction data; and a motion to disqualify Assistant United States Attorney Jean-David Barnea from representing the Government. The court addressed the disqualification motion first. The motions to set aside the earlier decision and appoint an expert were left for later.

Disqualification Standards

Federal courts have inherent authority to disqualify lawyers to protect the fairness of the litigation process. Disqualification motions are disfavored and require a high level of proof. Disqualification is generally warranted only when a lawyer’s conduct creates a significant risk of unfairly affecting the proceeding.

Brutus Trading relied mainly on New York’s witness-advocate rule. That rule generally prevents a lawyer from representing a party in a matter in which the lawyer is likely to testify about an important factual issue. Courts apply the rule cautiously, particularly before it is clear that the lawyer will actually be needed as a witness. Brutus Trading also argued that Barnea had a conflict of interest because he allegedly participated in the Government’s fraud on the court.

Court’s Analysis

The court rejected the witness-advocate argument. No trial or evidentiary hearing had been scheduled, and the case was closed after the dismissal and appellate affirmance. The court expected to resolve the Rule 60(d)(3) motion based on the written submissions without an evidentiary hearing. Because it was speculative whether Barnea would ever testify, whether his testimony would be significant, or whether it would be necessary, the court held that disqualification on this basis was premature.

The court also rejected the conflict-of-interest argument. It described Brutus Trading’s allegations of fraud on the court as unsupported and insufficient to establish that Barnea or another Government lawyer intentionally deceived the court. Even assuming the Government was wrong when it denied that Standard Chartered conducted unlawful transactions after 2007, the court said that this did not show that Barnea knew about or intentionally concealed the alleged conduct. The court also noted that Brutus Trading itself claimed that forensic analysis was needed to uncover the alleged transactions in the bank’s electronic records.

Ruling

Judge Paul A. Engelmayer denied Brutus Trading’s motion to disqualify Barnea. The court stated that Barnea’s continued participation did not create a risk of unfairly affecting the case. It said Brutus Trading could renew the motion if an evidentiary hearing were later scheduled and a renewed motion complied with Federal Rule of Civil Procedure 11. The court directed the clerk to terminate the motion at Docket 127 and set deadlines for the Government’s responses to the unresolved motions to set aside the dismissal and appoint an independent expert.